The inventory purchases budget is based on which budget?
A) Cash budget
B) Sales budget
C) Selling and administrative expense budget
D) None of the answers are correct.

Question

Quizplus · Accepted Answer

The inventory purchases budget is based on the sales budget. The sales budget projects the expected sales revenue for a period, which is necessary to determine the amount of inventory needed to meet the demand. The inventory purchases budget translates the sales forecast into the quantity and cost of materials and goods that need to be purchased. The cash budget determines the cash inflows and outflows, including the payments for inventory purchases. The selling and administrative expense budget reflects the costs associated with running the business, such as salaries, rent, and utilities, and does not directly impact inventory purchases.

The Inventory Purchases Budget Is Based on Which Budget